Alphabet is planning on investing $1bn into Lyft, according to a report from Bloomberg, published in the same week that Alphabet subsidiary Waymo received word that Uber would not be allowed to seek private arbitration in the pair’s lawsuit. In combination, the two moves could shortly see Lyft dethrone the embattled Uber (which has also had its licence revoked in London, though that is subject to appeal).
Another potential nail in Uber’s coffin is a new deal that will see Intel hardware power Waymo’s Chrysler Pacifica minivans. This is another example of the battle lines forming in the auto industry, with Intel signing up Waymo as a hardware partner – which likely means that auto makers will eventually begin buying package deals comprising Intel’s embedded processors, Mobileye’s machine vision silicon for camera processing, and Waymo’s LiDAR sensors and software.
On the opposite side from Intel is Nvidia, the other most prominent player in this area, which is positioning its Drive PX 2 computer as the ultimate sensor fusion option for self-driving vehicles – using its GPU expertise to provide the horsepower need to process camera feeds, radar readings, and LiDAR inputs, to provide a complete view for the car to make decisions with.
The new deal sees Intel outfit Waymo’s test fleet of Chrysler Pacifica minivans with new Intel-based “sensor processing, general compute, and connectivity, enabling real-time decisions for full autonomy in city conditions.” Intel says that it can offer Waymo the processing power required for SAE Level 4 and 5 autonomy – which we are interpreting as meaning that Intel thinks its platform is ready for completely driverless vehicles.
The pair say that the Intel-powered Waymo fleet has clocked up 3m miles of real-world driving on US roads, more than any other autonomous fleet. If our assumption is correct, that this is the beginning of a joint package offering to automakers, the Intel is firmly backing Waymo’s approach.
Elsewhere, Bloomberg says that Alphabet has been holding conversations with Lyft in recent weeks, and that the investment will come from either Google itself, or Alphabet’s CapitalG private equity division. Alphabet and Lyft are declining to comment, and Bloomberg says its sources note that a deal may not come together – but the pair do have an active R&D deal. It has also come to light that Google spent $1.1bn on its self-driving project between 2009 and 2015.
Lyft has been gaining market share from Uber in recent months, in the markets in which it competes with the dominant ride-sharing service, mostly due to Uber’s spate of well-documented bad PR episodes. It has launched a new marketing campaign, and a cash injection would allow it to compete more aggressively in driver subsidies to enable pricing wars with Uber – a rival that has been far better funded.
However, Alphabet might be looking to swallow Lyft entirely. Before it spun out the Waymo division, it seemed like Google was preparing to launch a ride-sharing division – according to comments from leadership. However, the Waymo launch looked like the end of that project, with Alphabet choosing to spin out the promising hardware, but abandon the trickier ride-sharing venture.
But Uber’s failures and embarrassments in the past few quarters will have inspired acquisition thoughts among staffers – which might eventually see the plucky startup absorbed by the tech monolith, and put to use as a vehicle for improving Google’s core web services, by adding more potential data points to its advertising and marketing systems.
Lyft lacks Uber’s tarnished brand, which could make up for its second-place billing. In markets where it competes with Uber, the ratio of Uber to Lyft is something like 70:30 to 60:40. Uber is still out in front, but the company has been having a very bad year so far.
Alphabet is a current investor in Uber (via its GV venture capital wing) – a relationship that has now soured in the wake of the intellectual property theft and conspiracy allegations that have been brought to court via Uber’s acquisition of Otto and Waymo’s subsequent lawsuit. That litigation is now heading for trial, as Uber has been denied its appeals for private arbitration – meaning that Waymo is going to get its day in court.
Recently, SoftBank was rumored to be preparing to take a majority stake in Uber. Talk of that potential has gone quiet, but if it transpires, SoftBank will have pounced when the Uber price was cheap – much like the Japanese telco did when it acquired ARM for some $32bn, in the wake of favorable foreign exchange rates that arose through the Brexit vote in the UK.
Uber has raised around $12bn from around 500 different investors. Its most recent valuation stood at around $60bn, but many investors have expressed doubt at getting a return on their investments – leading to a pretty active secondary market for the shares, which values Uber at around $50bn, which is a pretty huge void away from the $68bn declared by Uber’s primary shareholders.
In comparison, Lyft is a minnow – valued at around $7.5bn, following a recent $600m funding round. GM is a notable investor, committing $500m back in January 2016, which valued Lyft at around $4.5bn at the time (when Uber was valued at north of $50bn). GM’s investment also gave it a seat on the Lyft board.
That deal also saw GM begin supplying cars for Lyft to lease to its drivers – which helped GM shift vehicles, and secured Lyft more drivers (from a pool of willing workers that didn’t own a suitable vehicle). GM said that because Lyft was more prevalent in urban markets, somewhere that GM does not compete heavily in, the company saw the deal as an opportunity rather than a threat.
Should ride-sharing begin seriously slashing the demand for private vehicle ownership in cities, the likes of GM may find themselves selling into companies like Lyft or Uber, providing a fleet of vehicles and associated maintenance contracts and guarantees.
Lyft has also signed a development deal with Drive.ai for a pilot project in California, with plans to test how the ride-sharing service could adopt autonomous vehicles. Due to launch in the near future, it is the first ride-sharing partnership for Drive.ai, which has also just completed a $50m Series B round. The pilot will likely focus on how to interact with passengers looking to use one of these vehicles, as well as the more obvious self-driving functions.